India’s manufacturing sector growth slowed to a four-month low in March, with the nationwide lockdown to contain the covid-19 outbreak throwing normal economic activity out of gear, according to a private survey released on Wednesday.
The manufacturing Purchasing Managers’ Index (PMI) for India declined from 54.5 in February to 51.8 in March. A figure of above 50 indicates expansion, while a sub-50 print signals contraction. The survey by data analytics firm IHS Markit tracks new orders, output, jobs, suppliers’ delivery time, and stocks of purchases for around 400 manufacturers.
The most prominent signs of trouble for Indian manufacturing came from the new export orders and future activity indices, which indicated falling global demand and softening domestic confidence, respectively, said Eliot Kerr, economist, IHS Markit. “Should the trajectory of injections continue in the same vein, the Indian manufacturing sector can expect a much sharper negative impact in the coming months, similar to the scale seen in other countries," said Kerr.
Other lead indicators also suggest substantial impact of the covid-19 outbreak on the economy. India’s goods and services tax (GST) collection fell to ₹97,597 crore in March. That compares with the ₹1.25 trillion target for the month. India’s largest carmaker Maruti Suzuki India Ltd’s domestic vehicle sales also plunged by 48% to 76,976 units during the month.
With the disruption in economic activity, most economists projected a gross domestic product contraction for the June quarter, while slashing their FY21 economic growth estimates.
The June quarter will witness hardships as the lockdown will lead to production cuts and job losses for casual labourers, said Indranil Pan, chief economist, IDFC Bank. “Even as the lockdown opens up, we think that it will be gradual, one step at a time, to see the implication of it on new infections. Thus, there is potential for domestic demand to remain low and crunched for an even more significant period," said Pan.
Last week, rating agency Crisil Ltd slashed its growth estimate for FY21 by 170 basis points to 3.5% and said that the adverse effects of the ongoing lockdown can dwarf the gains from the sharp drop in crude oil prices, and the anticipated monetary and fiscal stimuli.
The government is working on a fiscal stimulus to jumpstart the economy apart from providing support to the healthcare and industrial sectors, economic affairs secretary Atanu Chakraborty hinted on Tuesday.